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Amsterdam Center for Social Media

Weekly Harvest Social Media Research: How to Measure the Value and ROI Social Media

By Mirella Kleijnen

When screening this week’s publications on Social Media, my eye was caught by the final publication of Marketing Science’s “Practice Prize Winner”. As explained on their website, this Practice Prize is awarded “for an outstanding implementation of marketing science concepts and methods. The methodology used must be sound and appropriate to the problem and organization, and the work should have had significant, verifiable and, preferably quantitative impact on the performance of the client organization.”

As such, the work by Kumar et al. (2013) is a typical example of research that bridges the gap between academia and practice, on a topic where this is desperately needed. While the importance of social media is trumpeted by many, there is still limited insight in the ROI of Social Media. In a time where marketing accountability is a hot topic of debate, a better understanding of the value of Social Media for the company in terms of actual performance is essential.

In their study, Kumar et al. suggest a method to measure social media return on investment (ROI) and the value of a customer’s word-of-mouth (WOM). They do so by composing two metrics they define as:

  • Customer Influence effect (CIE), which is “the net influence wielded by a user (in a social network) in terms of his or her ability to spread positive or negative WOM through his or her direct and indirect connections”,
  • Customer Influence Value (CIV), which is “the monetary gain/loss realized by the firm that is attributable to a customer’s influence effect.”

In other words, this method allows companies to assess to what extent their social media strategy is effective (firm level) and capture the actual monetary value of an individual in the social network (customer level). Using those metrics clearly showed a competitive advantage for the retailer that was being investigated (Hokey Pokey, an ice cream retailer). For example, by being able to identify the actual value of individuals and ‘seeding’ of these customers, Hokey Pokey realized an increase of 49% in brand awareness, 83% in ROI, and 40% in sales.

The framework developed in this study is a step forward in identifying the actual value of social media from a strategic perspective. It allows companies to gain a better insight in the monetary value of such campaigns, which have often been difficult to grasp. However, as this research shows, those effects can be of substantial value to companies, supporting the intuition of many marketers that social media is important and effective tool in today’s marketing strategy.

Kumar, V. Vikram Bhaskaran, Rohan Mirchandani and Milap Shah (2013), “Creating a Measurable Social Media Marketing Strategy: Increasing the Value and ROI of Intangibles and Tangibles for Hokey Pokey”, Marketing Science, 32(2), 194–212.

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Category: merken, Onderzoek, ROI, Social media

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